Friday, December 2, 2022

President of the Central Bank of Chile admits economic learning after the pandemic

The president of the Central Bank of Chile, Rosanna Costa, said this Monday that the world “is experiencing the consequences of one of the biggest macroeconomic shocks of the century,” during her opening speech at the XXV Annual Conference of the Central Bank of Chile “Heterogeneity in Macroeconomics: Implications for Monetary Policy”.

“In the last three years we have lived through one of the most challenging times for policymakers, where governments and central banks were forced to deploy everything in their power to contain the health and economic consequences of the pandemic and, Lately, also to contain inflationary pressures”, pointed out Costa.

During these years, he pointed out, “we have learned that the effects of the pandemic differed significantly between economies but also within households and companies with heterogeneous characteristics.”

“The different exposure that households and companies have to credit conditions, supply chains and final demand affected their reaction to the original shock and also to the different policies”,

Chile reached inflation of 7.2% at the end of 2021, the highest in 14 years, forcing the Central Bank to take unprecedented measures and withdraw monetary stimuli that it had applied to alleviate the economic consequences of the pandemic, in March 2020.

Along the same lines, the latest Consumer Price Index (CPI) recorded a year-on-year rise of 12.8% in October, with accumulated inflation of 11.4% in the first ten months of the year, far from the tolerance range set by the Central Bank. between 2.4 and 4.0%.

To curb inflation, the issuer raised rates to 11.25%, the highest in decades.

The financial aid provided by the Chilean government to alleviate the impact of the pandemic, as well as early withdrawals from pension funds, boosted consumption considerably last year, in addition to the effects of the war in Ukraine, according to experts. .

Costa also highlighted that the size of the companies and the distribution of family income as “important sources of heterogeneity” to consider when developing sound economic policies to face complex scenarios.

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